Consider a $1,000 par value bond with a 7 percent annual coupon. The bond pays interest annually.

Question:

Consider a $1,000 bond with a 7 percent annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10 percent?
a. 10.00%
b. 8.46%
c. 7.00%
d. 8.52%
e. 8.37%

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...